Intrinsic value of South Jersey Industries - SJI

Previous Close

$29.29

  Intrinsic Value

$15.99

stock screener

  Rating & Target

sell

-45%

Previous close

$29.29

 
Intrinsic value

$15.99

 
Up/down potential

-45%

 
Rating

sell

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of SJI stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  8.02
  3.70
  3.83
  3.95
  4.05
  4.15
  4.23
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.80
  4.82
  4.84
  4.86
  4.87
  4.88
  4.90
  4.91
  4.92
  4.92
  4.93
  4.94
Revenue, $m
  0
  1,075
  1,117
  1,161
  1,208
  1,258
  1,311
  1,367
  1,427
  1,491
  1,558
  1,629
  1,703
  1,782
  1,865
  1,953
  2,046
  2,143
  2,246
  2,353
  2,467
  2,586
  2,712
  2,844
  2,983
  3,129
  3,283
  3,444
  3,614
  3,792
  3,979
Variable operating expenses, $m
 
  615
  639
  664
  691
  719
  750
  782
  816
  852
  891
  931
  973
  1,019
  1,066
  1,116
  1,169
  1,225
  1,283
  1,345
  1,410
  1,478
  1,550
  1,625
  1,705
  1,788
  1,876
  1,968
  2,065
  2,167
  2,274
Fixed operating expenses, $m
 
  267
  273
  280
  287
  294
  302
  309
  317
  325
  333
  341
  350
  358
  367
  377
  386
  396
  406
  416
  426
  437
  448
  459
  470
  482
  494
  506
  519
  532
  545
Total operating expenses, $m
  847
  882
  912
  944
  978
  1,013
  1,052
  1,091
  1,133
  1,177
  1,224
  1,272
  1,323
  1,377
  1,433
  1,493
  1,555
  1,621
  1,689
  1,761
  1,836
  1,915
  1,998
  2,084
  2,175
  2,270
  2,370
  2,474
  2,584
  2,699
  2,819
Operating income, $m
  189
  194
  205
  217
  230
  244
  260
  276
  294
  314
  334
  357
  380
  405
  432
  460
  491
  523
  557
  593
  631
  672
  714
  760
  808
  859
  912
  969
  1,029
  1,093
  1,160
EBITDA, $m
  299
  307
  322
  339
  357
  376
  397
  420
  444
  470
  497
  527
  558
  592
  627
  665
  704
  747
  791
  839
  889
  942
  998
  1,057
  1,120
  1,186
  1,256
  1,329
  1,407
  1,489
  1,576
Interest expense (income), $m
  32
  46
  49
  53
  56
  60
  64
  69
  73
  78
  83
  89
  95
  101
  107
  114
  121
  129
  137
  145
  154
  163
  173
  183
  194
  206
  218
  230
  243
  257
  272
Earnings before tax, $m
  168
  148
  155
  164
  174
  184
  195
  208
  221
  235
  251
  268
  285
  304
  325
  346
  369
  394
  420
  448
  477
  508
  541
  576
  614
  653
  695
  739
  786
  835
  888
Tax expense, $m
  54
  40
  42
  44
  47
  50
  53
  56
  60
  64
  68
  72
  77
  82
  88
  93
  100
  106
  113
  121
  129
  137
  146
  156
  166
  176
  188
  200
  212
  226
  240
Net income, $m
  119
  108
  113
  120
  127
  134
  143
  152
  161
  172
  183
  195
  208
  222
  237
  253
  270
  287
  306
  327
  348
  371
  395
  421
  448
  477
  507
  540
  574
  610
  648

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  18
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  3,731
  3,854
  4,002
  4,160
  4,329
  4,508
  4,699
  4,901
  5,116
  5,343
  5,583
  5,837
  6,105
  6,388
  6,686
  7,001
  7,332
  7,681
  8,048
  8,435
  8,842
  9,270
  9,721
  10,194
  10,692
  11,216
  11,766
  12,344
  12,952
  13,591
  14,262
Adjusted assets (=assets-cash), $m
  3,713
  3,854
  4,002
  4,160
  4,329
  4,508
  4,699
  4,901
  5,116
  5,343
  5,583
  5,837
  6,105
  6,388
  6,686
  7,001
  7,332
  7,681
  8,048
  8,435
  8,842
  9,270
  9,721
  10,194
  10,692
  11,216
  11,766
  12,344
  12,952
  13,591
  14,262
Revenue / Adjusted assets
  0.000
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
Average production assets, $m
  694
  719
  747
  776
  808
  841
  877
  915
  955
  997
  1,042
  1,090
  1,140
  1,192
  1,248
  1,307
  1,369
  1,434
  1,502
  1,574
  1,650
  1,730
  1,814
  1,903
  1,996
  2,093
  2,196
  2,304
  2,418
  2,537
  2,662
Working capital, $m
  -480
  31
  32
  34
  35
  36
  38
  40
  41
  43
  45
  47
  49
  52
  54
  57
  59
  62
  65
  68
  72
  75
  79
  82
  87
  91
  95
  100
  105
  110
  115
Total debt, $m
  1,336
  1,411
  1,507
  1,610
  1,721
  1,838
  1,962
  2,095
  2,235
  2,383
  2,540
  2,706
  2,881
  3,065
  3,260
  3,466
  3,682
  3,910
  4,150
  4,402
  4,668
  4,947
  5,242
  5,551
  5,876
  6,218
  6,577
  6,955
  7,352
  7,769
  8,207
Total liabilities, $m
  2,441
  2,517
  2,613
  2,716
  2,827
  2,944
  3,068
  3,201
  3,341
  3,489
  3,646
  3,812
  3,987
  4,171
  4,366
  4,572
  4,788
  5,016
  5,256
  5,508
  5,774
  6,053
  6,348
  6,657
  6,982
  7,324
  7,683
  8,061
  8,458
  8,875
  9,313
Total equity, $m
  1,289
  1,337
  1,389
  1,444
  1,502
  1,564
  1,630
  1,701
  1,775
  1,854
  1,937
  2,025
  2,119
  2,217
  2,320
  2,429
  2,544
  2,665
  2,793
  2,927
  3,068
  3,217
  3,373
  3,537
  3,710
  3,892
  4,083
  4,283
  4,494
  4,716
  4,949
Total liabilities and equity, $m
  3,730
  3,854
  4,002
  4,160
  4,329
  4,508
  4,698
  4,902
  5,116
  5,343
  5,583
  5,837
  6,106
  6,388
  6,686
  7,001
  7,332
  7,681
  8,049
  8,435
  8,842
  9,270
  9,721
  10,194
  10,692
  11,216
  11,766
  12,344
  12,952
  13,591
  14,262
Debt-to-equity ratio
  1.036
  1.050
  1.090
  1.120
  1.150
  1.170
  1.200
  1.230
  1.260
  1.290
  1.310
  1.340
  1.360
  1.380
  1.410
  1.430
  1.450
  1.470
  1.490
  1.500
  1.520
  1.540
  1.550
  1.570
  1.580
  1.600
  1.610
  1.620
  1.640
  1.650
  1.660
Adjusted equity ratio
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347
  0.347

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  119
  108
  113
  120
  127
  134
  143
  152
  161
  172
  183
  195
  208
  222
  237
  253
  270
  287
  306
  327
  348
  371
  395
  421
  448
  477
  507
  540
  574
  610
  648
Depreciation, amort., depletion, $m
  110
  113
  117
  122
  127
  132
  138
  143
  150
  156
  163
  170
  178
  186
  195
  204
  214
  224
  235
  246
  258
  270
  283
  297
  312
  327
  343
  360
  378
  396
  416
Funds from operations, $m
  298
  221
  231
  242
  253
  266
  280
  295
  311
  328
  346
  366
  386
  409
  432
  457
  483
  511
  541
  573
  606
  641
  679
  718
  760
  804
  850
  900
  951
  1,006
  1,064
Change in working capital, $m
  36
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
Cash from operations, $m
  262
  220
  229
  240
  252
  265
  279
  293
  309
  326
  344
  364
  384
  406
  430
  454
  481
  509
  538
  570
  603
  638
  675
  714
  756
  800
  846
  895
  947
  1,001
  1,059
Maintenance CAPEX, $m
  0
  -108
  -112
  -117
  -121
  -126
  -131
  -137
  -143
  -149
  -156
  -163
  -170
  -178
  -186
  -195
  -204
  -214
  -224
  -235
  -246
  -258
  -270
  -283
  -297
  -312
  -327
  -343
  -360
  -378
  -396
New CAPEX, $m
  -278
  -26
  -28
  -29
  -31
  -34
  -36
  -38
  -40
  -42
  -45
  -47
  -50
  -53
  -56
  -59
  -62
  -65
  -69
  -72
  -76
  -80
  -84
  -88
  -93
  -98
  -103
  -108
  -113
  -119
  -125
Cash from investing activities, $m
  -245
  -134
  -140
  -146
  -152
  -160
  -167
  -175
  -183
  -191
  -201
  -210
  -220
  -231
  -242
  -254
  -266
  -279
  -293
  -307
  -322
  -338
  -354
  -371
  -390
  -410
  -430
  -451
  -473
  -497
  -521
Free cash flow, $m
  17
  85
  89
  94
  99
  105
  112
  119
  126
  135
  144
  153
  164
  175
  188
  201
  215
  230
  246
  263
  281
  300
  321
  342
  366
  390
  416
  444
  473
  504
  537
Issuance/(repayment) of debt, $m
  -135
  93
  96
  103
  110
  117
  125
  132
  140
  148
  157
  166
  175
  185
  195
  205
  216
  228
  240
  253
  266
  280
  294
  309
  325
  342
  359
  378
  397
  417
  438
Issuance/(repurchase) of shares, $m
  214
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  79
  93
  96
  103
  110
  117
  125
  132
  140
  148
  157
  166
  175
  185
  195
  205
  216
  228
  240
  253
  266
  280
  294
  309
  325
  342
  359
  378
  397
  417
  438
Total cash flow (excl. dividends), $m
  96
  178
  186
  197
  209
  222
  236
  251
  266
  283
  301
  319
  339
  360
  382
  406
  431
  458
  486
  515
  547
  580
  615
  652
  691
  732
  775
  821
  870
  921
  975
Retained Cash Flow (-), $m
  -251
  -48
  -51
  -55
  -58
  -62
  -66
  -70
  -74
  -79
  -83
  -88
  -93
  -98
  -104
  -109
  -115
  -121
  -127
  -134
  -141
  -149
  -156
  -164
  -173
  -182
  -191
  -201
  -211
  -222
  -233
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  130
  135
  142
  151
  160
  170
  181
  192
  204
  217
  231
  246
  262
  279
  297
  316
  336
  358
  381
  405
  431
  458
  487
  518
  550
  585
  621
  659
  700
  742
Discount rate, %
 
  8.20
  8.61
  9.04
  9.49
  9.97
  10.47
  10.99
  11.54
  12.12
  12.72
  13.36
  14.02
  14.73
  15.46
  16.24
  17.05
  17.90
  18.79
  19.73
  20.72
  21.76
  22.84
  23.99
  25.19
  26.45
  27.77
  29.16
  30.61
  32.15
  33.75
PV of cash for distribution, $m
 
  120
  114
  110
  105
  100
  94
  87
  80
  73
  66
  58
  51
  44
  37
  31
  25
  20
  16
  12
  9
  7
  5
  3
  2
  2
  1
  1
  0
  0
  0
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

South Jersey Industries, Inc. (SJI) is an energy services holding company. The Company provides a range of energy-related products and services, primarily through its subsidiaries. Its subsidiaries include South Jersey Gas Company (SJG), South Jersey Energy Company (SJE), South Jersey Resources Group, LLC (SJRG), South Jersey Exploration, LLC (SJEX), Marina Energy, LLC (Marina), South Jersey Energy Service Plus, LLC (SJESP) and SJI Midstream, LLC (Midstream). Its segments include Gas utility operations (SJG), which consist primarily of natural gas distribution; Wholesale energy operations, which include the activities of SJRG and SJEX; SJE, which is involved in both retail gas and retail electric activities; On-Site energy production, which consists of Marina's thermal energy facility; Appliance service operations, which include SJESP, and Corporate and Services segment, which includes the activities of Midstream.

FINANCIAL RATIOS  of  South Jersey Industries (SJI)

Valuation Ratios
P/E Ratio 19.6
Price to Sales 2.2
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 8.9
Price to Free Cash Flow -145.5
Growth Rates
Sales Growth Rate 8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -19.7%
Cap. Spend. - 3 Yr. Gr. Rate -2.6%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 62.7%
Total Debt to Equity 103.6%
Interest Coverage 6
Management Effectiveness
Return On Assets 3.9%
Ret/ On Assets - 3 Yr. Avg. 4%
Return On Total Capital 4.6%
Ret/ On T. Cap. - 3 Yr. Avg. 4.6%
Return On Equity 10.2%
Return On Equity - 3 Yr. Avg. 10.6%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 29.9%
EBITDA Margin - 3 Yr. Avg. 27.1%
Operating Margin 18.3%
Oper. Margin - 3 Yr. Avg. 16.4%
Pre-Tax Margin 16.2%
Pre-Tax Margin - 3 Yr. Avg. 14.2%
Net Profit Margin 11.5%
Net Profit Margin - 3 Yr. Avg. 11.1%
Effective Tax Rate 32.1%
Eff/ Tax Rate - 3 Yr. Avg. 12.7%
Payout Ratio 68.9%

SJI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SJI stock intrinsic value calculation we used $1037 million for the last fiscal year's total revenue generated by South Jersey Industries. The default revenue input number comes from 2016 income statement of South Jersey Industries. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our SJI stock valuation model: a) initial revenue growth rate of 3.7% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 8.2%, whose default value for SJI is calculated based on our internal credit rating of South Jersey Industries, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of South Jersey Industries.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of SJI stock the variable cost ratio is equal to 57.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $260 million in the base year in the intrinsic value calculation for SJI stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for South Jersey Industries.

Corporate tax rate of 27% is the nominal tax rate for South Jersey Industries. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the SJI stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for SJI are equal to 66.9%.

Life of production assets of 6.4 years is the average useful life of capital assets used in South Jersey Industries operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for SJI is equal to 2.9%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $1289 million for South Jersey Industries - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 79.731 million for South Jersey Industries is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of South Jersey Industries at the current share price and the inputted number of shares is $2.3 billion.

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COMPANY NEWS

▶ South Jersey Industries posts 3Q loss   [05:39AM  Associated Press]
▶ South Jersey Industries, Inc. to Host Earnings Call   [Nov-03-17 08:50AM  ACCESSWIRE]
▶ South Jersey Industries posts 2Q loss   [Aug-05-17 01:13AM  Associated Press]
▶ South Jersey Industries posts 1Q profit   [May-09-17 09:33AM  Associated Press]
▶ Top Ranked Income Stocks to Buy for May 2nd   [May-02-17 10:47AM  Zacks]
▶ A Small-Cap Sector ETF That's Working   [Apr-11-17 12:41PM  Investopedia]
▶ South Jersey Industries posts 4Q profit   [05:00AM  Associated Press]
▶ South Jersey Industries: SJI Reports FY and Q4 2016 Results   [Feb-23-17 09:27PM  GlobeNewswire]
▶ Is South Jersey Industries Inc (SJI) A Good Stock To Buy?   [Dec-12-16 08:55AM  at Insider Monkey]
▶ Six Dividend Stocks Sending More Cash To Shareholders   [Nov-28-16 10:56AM  at Insider Monkey]
Financial statements of SJI
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